Wavelet Neural Networks: With Applications in Financial Engineering, Chaos, and Classification PDF
Preview Wavelet Neural Networks: With Applications in Financial Engineering, Chaos, and Classification
Wavelet Neural Networks Wavelet Neural Networks With Applications in Financial Engineering, Chaos, and Classification AntoniosK.Alexandridis SchoolofMathematics,StatisticsandActuarialScience UniversityofKent Canterbury,UnitedKingdom AchilleasD.Zapranis DepartmentofAccountingandFinance UniversityofMacedonia Thessaloniki,Greece Copyright©2014byJohnWiley&Sons,Inc.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinanyformor byanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,exceptas permittedunderSection107or108ofthe1976UnitedStatesCopyrightAct,withouteithertheprior writtenpermissionofthePublisher,orauthorizationthroughpaymentoftheappropriateper-copyfeeto theCopyrightClearanceCenter,Inc.,222RosewoodDrive,Danvers,MA01923,(978)750-8400, fax(978)750-4470,oronthewebatwww.copyright.com.RequeststothePublisherforpermission shouldbeaddressedtothePermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken, NJ07030,(201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permission. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbesteffortsin preparingthisbook,theymakenorepresentationsorwarrantieswithrespecttotheaccuracyor completenessofthecontentsofthisbookandspecificallydisclaimanyimpliedwarrantiesof merchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedorextendedbysales representativesorwrittensalesmaterials.Theadviceandstrategiescontainedhereinmaynotbesuitable foryoursituation.Youshouldconsultwithaprofessionalwhereappropriate.Neitherthepublishernor authorshallbeliableforanylossofprofitoranyothercommercialdamages,includingbutnotlimitedto special,incidental,consequential,orotherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,pleasecontactour CustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outsidetheUnitedStatesat (317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappearsinprintmay notbeavailableinelectronicformats.FormoreinformationaboutWileyproducts,visitourwebsiteat www.wiley.com. LibraryofCongressCataloging-in-PublicationData: Alexandridis,AntoniosK. Waveletneuralnetworks:withapplicationsinfinancialengineering, chaos,andclassification/AntoniosK.Alexandridis,Schoolof Mathematics,StatisticsandActuarialScience,UniversityofKent, Canterbury,UK,AchilleasD.Zapranis,DepartmentofAccountingand Finance,UniversityofMacedonia,Thessaloniki,Greece. pagescm Includesbibliographicalreferencesandindex. ISBN978-1-118-59252-6(cloth) 1.Wavelets(Mathematics) 2.Neuralnetworks(Computerscience) 3.Financialengineering. I.Zapranis,Achilleas,1965– II.Title. QA403.3.A4282014 006.3′2–dc23 2013047838 PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 Toourfamilies Contents Preface xiii 1 MachineLearningandFinancialEngineering 1 FinancialEngineering / 2 FinancialEngineeringandRelatedResearchAreas / 3 FunctionsofFinancialEngineering / 5 ApplicationsofMachineLearninginFinance / 6 FromNeuraltoWaveletNetworks / 8 WaveletAnalysis / 8 ExtendingtheFourierTransform:TheWaveletAnalysis Paradigm / 10 NeuralNetworks / 17 WaveletNeuralNetworks / 19 ApplicationsofWaveletNeuralNetworksinFinancialEngineering, Chaos,andClassification / 21 BuildingWaveletNetworks / 23 VariableSelection / 23 ModelSelection / 24 ModelAdequacyTesting / 25 BookOutline / 25 References / 27 vii viii CONTENTS 2 NeuralNetworks 35 ParallelProcessing / 36 ProcessingUnits / 37 ActivationStatusandActivationRules / 37 ConnectivityModel / 39 Perceptron / 41 TheApproximationTheorem / 42 TheDeltaRule / 42 BackpropagationNeuralNetworks / 44 MultilayerFeedforwardNetworks / 44 TheGeneralizedDeltaRule / 45 BackpropagationinPractice / 49 TrainingwithBackpropagation / 51 NetworkParalysis / 54 LocalMinima / 54 NonuniqueSolutions / 56 ConfigurationReference / 56 Conclusions / 59 References / 59 3 WaveletNeuralNetworks 61 WaveletNeuralNetworksforMultivariateProcessModeling / 62 StructureofaWaveletNeuralNetwork / 62 InitializationoftheParametersoftheWaveletNetwork / 64 TrainingaWaveletNetworkwithBackpropagation / 69 StoppingConditionsforTraining / 72 EvaluatingtheInitializationMethods / 73 Conclusions / 77 References / 78 4 ModelSelection:SelectingtheArchitecture oftheNetwork 81 TheUsualPractice / 82 EarlyStopping / 82 Regularization / 83 Pruning / 84 MinimumPredictionRisk / 86
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